Selling Guide

Published August 29, 2017

B1-1-03: Allowable Age of Credit Documents and Federal Income Tax Returns (10/24/2016)

This topic contains information on the allowable age of credit documents and federal income tax returns.

Allowable Age of Credit Documents

Credit documents include credit reports and employment, income, and asset documentation. For all mortgage loans (existing and new construction), the credit documents must be no more than four months old on the note date. When consecutive credit documents are in the loan file, the most recent document is used to determine whether it meets the age requirement. For example, when two consecutive monthly bank statements are used to verify a depository asset, the date of the most recent statement must be no more than four months old on the note date. If the credit documents are older than allowed, the lender must update them. For age requirements related to appraisals, see B4-1.2-02, Appraisal Age and Use Requirements.

Allowable Age of Federal Income Tax Returns

For some types of sources of income, Fannie Mae requires lenders to obtain copies of federal income tax returns (personal returns and, if applicable, business returns). The “most recent year’s” tax return is defined as the last return scheduled to have been filed with the IRS. For example,

If Today’s Date is.... Then the Most Recent Year’s Tax Return would be...
February 15, 2013 2011
April 17, 2013 2012
December 15, 2013 2012

The following table describes which tax-related documentation to obtain depending on the application date and disbursement date of the mortgage loan.

Application Date Disbursement Date Documentation Required
October 151, [current year minus 1] to April 142, current year October 1511[current year minus 1] to April 1422, current year The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.
April 1511, current year to June 30, current year The previous year’s tax return (the return due in April of the current year) is recommended, but not required.

The lender must ask the borrower whether he or she has completed and filed his or her return with the IRS for the previous year. If the answer is yes, the lender must obtain copies of that return. If the answer is no, the lender must obtain copies of tax returns for prior two years.

Lenders must only obtain completed and signed IRS Form 4506–T for transcripts of tax returns provided by the borrower to the lender. (The lender is not required to file IRS Form 4506–T for tax returns not provided by the borrower.)

July 1, current year to October 1422, current year The lender must obtain
  • the most recent year’s tax return, OR all of the following:

  • A copy of IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filed with the IRS,

  • The lender must review the total tax liability reported on IRS Form 4868 and compare it with the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.

  • IRS Form 4506–T transcripts confirming “No Transcripts Available” for the applicable tax year, and

  • Returns for the prior two years

April 1511, current year to October 1422, current year April 1511, current year to December 31, current year
January 1, [current year plus 1] to April 1422, [current year plus 1] The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.

Exceptions

  • For business tax returns, if the borrower’s business uses a fiscal year (a year ending on the last day of any month except December), the lender may adjust the dates in the above chart to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new mortgage loan.

  • For loans with income validated by DU, lenders may rely on the age of tax transcript methodology provided by the service. See B3-2-02, DU Validation Service.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2016–08 October 24, 2016
Announcement SEL-2014–13 November 10, 2014
Announcement SEL-2014–11 August 26, 2014
Announcement SEL-2013–07 September 24, 2013
Announcement SEL-2013–04 May 28, 2013
Announcement 09–19 June 8, 2009

1

Or the April/October filing dates for the year in question as published by the IRS.

2

Or the day prior to the April/October filing dates for the year in question as published by the IRS.